The Top 5 Tax Scams Targeting Taxpayers (And How To Spot Them)

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Tax day was only a couple of weeks ago. In that time, the internal revenue service (IRS) issued $142 billion worth in tax refunds.

For the W-2 employees, tax time means they get the extra chunk of cash because the IRS takes too much out of their checks (unfortunately, the same can’t be said about independent contractors and business owners).

In order to pay taxes or receive a refund, you need to submit sensitive information to the IRS. This means you can easily be the victim of a tax scam. Don’t fall victim to IRS mail scams and these other common tax scams.

Tax Crimes irs mail scams

1. IRS Mail Scams

Anyone who keeps up with IRS scams knows the IRS regularly contacts taxpayers via mail.

Unfortunately, scammers also know this. This is why they will send fake IRS invoices through the mail. And these are the hardest to authenticate.

However, there are ways to identify an IRS mail scam. First, look at the directions.

The IRS will ask you to make your checks out to the United States Treasury. Many scammers don’t realize this significance. They will ask you to make checks out to the IRS.

You can also look at the address. The IRS has many offices, so it’s easy to overlook an unfamiliar address. However, it’s crucial you do your research and ensure the invoice was sent from a real IRS address.

If you ever received an IRS invoice, they’re usually pretty lenient about the payment due date, giving you a couple of weeks before they charge additional interest. If you receive a letter asking for immediate funds, this should be a red flag.

Are you still unsure about an IRS invoice? Do one of two things:

  • Call the IRS and ask if the invoice is legitimate
  • Search for your invoice on the IRS website

If the IRS can’t find a record of the invoice, don’t pay it.

Tax Crimes irs mail scams

2. Phone Call Scams

IRS scam phone calls have been the main warning on the news. You receive a phone call saying you either owe money to the IRS or the IRS is suing you. Many people have released funny videos recording their calls.

Unfortunately, many people fell for the IRS scam calls. They hide their caller ID or call with a fake caller ID, attempting to look more legitimate.

They call with IRS employee badge numbers and use aggressive tactics, forcing you to pay. They usually threaten you with arrest.

The scammers ask for specific payment transfers, either from a wire transfer or a debit card. This makes their payment hard to trace and contest.

If you receive any call from the IRS, it’s a scam. The IRS primarily contacts you through the mail. The IRS also doesn’t use aggressive or threatening tactics.

Tax Crimes irs mail scams

3. Email Scams

Like phone calls, the IRS won’t likely email. If you don’t have an online payment plan set up with the IRS, the IRS shouldn’t have your email address in the first place.

However, these emails have been successful. That’s because they look legitimate. They use certain IRS branding such as their logo.

While some use the same aggressive sales tactics as the phone scammers, scammers have become smarter and use more passive ways to retrieve your information.

This includes emailing you about confirming or changing your filing status, emailing you about your refund, or even to create a PIN number.

While these seem like a legitimate and even an innocent reason to contact you, they do trick you.

That’s because they force you to enter sensitive data in a separate web page. This web page looks like an IRS page but it’s not — it’s a fraudulent page designed to steal your information.

Some email scams may also force you to download files that contain malware. This malware can go in your system and steal your sensitive data.

There are three things you should do when you receive an IRS scam email:

  • Don’t open it, download anything, or visit the web page they provide.
  • Forward the email to the IRS ([email protected]). The IRS is trying to crack down on fraudulent emails.
  • After sending the fraud email to the IRS, delete the email.

As mentioned before, if the IRS requests any changes or confirmations made to your account or for your return, they will mail you a letter. You can easily trace this letter back on the IRS website or call the IRS and ask.

Tax Crimes irs mail scams

4. Text Message Scams

This scam is becoming more common. You’ll receive a text message claiming to be the IRS.

They will likely send you links or ask you to respond. This is another phishing scam. The fraudsters will likely download malware on your phone, stealing your information.

It’s a scam. Like phone calls, the IRS will never text you under any circumstance. You can text the IRS the fraudulent text message at (202) 552-1226. This way, the IRS can track down these phishing scams.

Tax Crimes irs mail scams

5. “Ghost” Tax Preparer Scams

Unfortunately, a scam can fall within someone you trust most — your tax preparer. Ghost tax preparers use unethical and oftentimes illegal practices. They win clients by advertising “big refunds.”

They get the name “ghost” tax preparers because they don’t sign their name on your refund or won’t mail your return. They typically ask you to sign off on everything and request you mail it.

The easiest way to tell the difference between a ghost and a legitimate tax prepare is how they charge you.

A ghost tax preparer will request they take a percentage of your refund. A legitimate tax preparer charges you a fee that you pay separately.

Tax Crimes irs mail scams

Other Unethical Tax Preparer Practices

Ghost tax preparers aren’t the only example of unethical tax preparers. Here are examples of actions that prove a preparer is unethical.

Tax Crimes irs mail scams

Falsifying Income

As mentioned previously, many unethical tax preparers find clients by offering the “biggest return.”

A common method of receiving big or paying little is by claiming false income.

Depending on your filing status, this either encompasses stating you paid too many taxes than what you paid or earned less than what you earned, resulting in paying little in taxes.

Some may even falsely enroll you into certain programs, such as claiming you qualify for certain tax credits (when you don’t) and listing you qualify for certain deductions (when you don’t).

Unethical preparers can get away with this because it’s hard to trace. Unfortunately, if the IRS does see through this, you’re the one who receives the penalty.

Depending on the severity of the penalty, you’ll be audited and forced to pay back interest and even be charged with a hefty fine.

Tax Crimes irs mail scams

Inflated Returns

In some cases, falsifying income or tax credits is hard to trace. But inflating a return is very easy to trace. The faulty preparer uses the current inflation rate to increase your return.

In reality, while inflation may cause a return increase, only specific factors qualify certain taxpayers for this.

How do you know you truly qualify for an inflated return?

Identify the preparer’s behavior. They shouldn’t tell you that you qualify before looking at your tax documents.

In addition, look for the other common red flags, such as the preparer not signing off on your return, taking a percentage of your return, and forcing you to file the return.

Tax Crimes irs mail scams

Avoiding Offshore Income Reporting

Do you have an offshore bank account?

Another way a tax preparer can promote a bigger return or fewer taxes paid is by urging you to not report the income or money in any offshore accounts. Doing so can result in strict enforcement from the IRS.

Tax Crimes irs mail scams

Excessive Business Tax Credits and Deductions

The IRS grants tax alleviation for businesses and self-employed individuals by allowing them to take additional business deductions.

Some businesses may qualify for specific tax credits. However, businesses need to still comply with the tax law in order to receive these deductions and credits.

Lying about deductions and credits is a common way for unethical tax preparers to promote their services to businesses. By “paying less business tax,” you’re lying to the IRS.

A common method is claiming deductions on non-qualifying expenses. For example, let’s say you took a vacation. This trip had nothing to do with work.

However, your tax preparer may urge you to lie and say all of those travel expenses were work-related.

A common example of falsely claiming credit is claiming a research credit. The research credit benefits companies that spend money on tools that go toward research and development.

This credit is commonly claimed by life science and technology firms.

However, if you can’t prove your business expenses fall in the research category, you don’t qualify for this credit.

Tax Crimes irs mail scams

Natural Disaster Scams

If a natural disaster hits your area, the IRS is kind enough to extend the tax deadline, often by several months or even a year. However, natural disasters are also an opportunity for scammers to take advantage of taxpayers.

The most common example of scammers is those posing as the IRS. They tell victims they’re providing natural disaster relief. They could contact you for several reasons, such as helping you file your return or file a casualty loss claim.

This is a scam because the IRS won’t solicit you for help. They may provide a service or hotline, but no IRS employee will personally offer to help you.

Another common natural disaster scam is a company posing as a charity. They will create a website, urging people to donate. Unfortunately, that website is not an IRS-owned charity and none of the proceeds will help natural disaster victims.

If you do want to donate to real charities, the IRS provides a list of legitimate charities that help out disaster victims in need. In addition, those charity donations are tax-deductible.

Tax Crimes irs mail scams

Identity Theft

Be careful which preparer or service you trust with filing your tax return. These services not only fail to file your return, but they also steal your identity along with it.

When you file your taxes, you provide sensitive information. This includes your social security number and bank account information. This information alone is enough for a scammer to steal your identity.

How do they gain this information? They pose as a preparer or a tax preparation service.

The best course of action to prevent this is by only taking your service to a reputable tax preparation professional or use reliable software.

All tax professionals require a license and a tax preparer identification number. From here, take advice from the ghost preparer section, such as if they will sign off on your return and will file it.

If you want to use tax preparation software, don’t settle for less than the major brands. While there are new and reliable brands, using the major name brands ensures your return is going to the right place.

Tax Crimes irs mail scams

How to Know You’re a Victim of Tax Scams

No one wants to be a victim of a tax scam. However, it can happen easier than you think. Here are common signs you’re a victim.

  • You sent the “IRS” money and later notice it’s not on their system
  • You receive a letter from the real IRS stating you never filed a tax return (you can call the IRS and confirm it’s them who sent the letter)
  • Your tax return is rejected without a clear reason
  • You received a tax refund, even though you didn’t file
  • You received tax forms from an employer you didn’t work for
  • You received a tax transcript, even though you never ordered one

Many of these signs point to identity theft or an unethical preparer.

Tax Crimes irs mail scams

Contact Us If You’re a Victim of Tax Scams

Tax scams such as IRS mail scams are becoming more common. Always find a reputable tax preparer and never send money or give out your sensitive information unless you confirm with the IRS that they’re contacting you.

Do you believe you were a victim and now your identity is compromised? Don’t worry — all hope is not lost. Take a look at our tax fraud investigation services to receive the help you need.

Managing Partner of Silver Tax Group, author of the book “Stop the IRS”. Practicing a variety of tax issues, regulations, laws and rights. Specializing exclusively on tax matters involving IRS audits, negotiation, settlements & compromises.

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